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Huntsman Advanced Materials LLC v. Onebeacon America Insurance Company

October 25, 2012

HUNTSMAN ADVANCED MATERIALS LLC,
PLAINTIFF,
v.
ONEBEACON AMERICA INSURANCE COMPANY, AND SPARTA INSURANCE COMPANY, FORMERLY KNOWN AS AMERICAN EMPLOYERS' INSURANCE COMPANY, DEFENDANTS.



The opinion of the court was delivered by: Honorable B. Lynn Winmill Chief U. S. District Judge

MEMORANDUM DECISION AND ORDER

INTRODUCTION

The Court has before it Defendants' Motion for Leave to Reopen Discovery in Compliance with Dkt . 122 (Dkt. 127), and Defendants' Motion for Leave to File Third Party Complaint (Dkt. 128).

BACKGROUND

This is an environmental insurance coverage case. It involves a phosphate mine in Caribou County, Idaho called the North Maybe Mine. Huntsman is the successor in interest of commercial general liability insurance policies purchased from OneBeacon in the 1960s and 70s. The background facts of the case are set out in detail in the Court's earlier decisions, and will not be repeated here. Procedurally, the indemnity phase of the case has been stayed until the RI/FS is concluded.

1. RI/FS Costs

Before addressing OneBeacon's motion to reopen discovery, the Court will state its position on whether RI/FS costs are defense costs or indemnity costs. The Court already explained its position in the related case of Wells Cargo, Inc. v. Transport Insurance Co., Case No. 1:08-cv-00491-BLW. In Wells Cargo, the Court explained that although case law on the issue is limited, the district court's decision in Hi-Mill Mfg. Co. v. Aetna Cas. & Sur. Co., 884 F. Supp. 1109, 1116-17 (E.D. Mich. 1995) is instructive. In Hi-Mill, the district court ruled that the policyholder was entitled to summary judgment that the RI/FS costs it was incurring constituted defense costs. Hi- Mill, 884 F. Supp. at 116-17. The court stated that a policyholder's receipt of a PRP letter places it in a defensive position critically important for the policyholder to perform the RI/FS to participate in developing the administrative record. Id. at 1117. Because the policyholder "conducted an RI/FS study for the sole purpose of minimizing or absolving itself of liability," the RI/FS expenses "were expended in defense of the underlying CERCLA action." Id. at 1111. This Court generally agreed with that reasoning.

The Court then explained, however, that it does not, and in fact could not at that point, specifically determine which cost items are defense costs. The Court could only rule that RI/FS costs generally are defense costs. The Court indicated that it may need to conduct an evidentiary hearing to make specific findings on the issue at some point.

The parties in this case no doubt keep themselves up to date on the rulings in Wells Cargo. Thus, OneBeacon has to be keenly aware of this Court's position on RI/FS costs. Still, OneBeacon spends the majority of its brief in support of its motion to reopen discovery trying to convince the Court to essentially reconsider and conclude that RI/FS costs are not defense costs. The Court will not re-examine that issue. The explanation above will suffice.

2. Motion for Leave to Reopen Discovery

Once the deadline for completing discovery set forth in the Case Management Order has passed, a party must show good cause to justify reopening discovery.

Fed.R.Civ.P. 16(b)."Rule 16(b)' s 'good cause' standard primarily considers the diligence of the party seeking the amendment. "The district court may modify the pretrial schedule 'if it cannot reasonably be met despite the diligence of the party seeking the extension.'" Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 609 (9th Cir. 1992) (quoting Fed.R.Civ.P. 16 advisory committee's notes (1983 amendment)). "If the party seeking the modification was not diligent, the inquiry should end and the motion to modify should not be granted." Zivkovic v. Southern California Edison Co., 302 F.3d 1080, 1087 (9th Cir. 2002) (citation and internal quotation marks omitted).

This case is a bit outside the general rule for reopening discovery because it is an environmental cleanup case being litigated in phases. Plus, as the Court mentioned in the related Wells Cargo case, deciphering which cost items are defense costs may require some additional discovery and an evidentiary hearing. Moreover, both parties agree that additional discovery is necessary; however, they don't agree on when it should be done. OneBeacon wants to do it now. Huntsman wants to do it after the RI/FS is completed. So the real question before the Court is simply whether to allow limited discovery to determine which RI/FS costs are defense costs now, or postpone it until after the RI/FS is completed.

OneBeacon indicates that it seeks only limited discovery. OneBeacon wants "to obtain documents relating to the work performed since the close of discovery, depositions of Huntsman and its consultants regarding work performed since the close of discovery, and possibly interrogatories related thereto." Def's Mem. in Support of Motion for Leave to Reopen Discovery, p.16, Dkt. 127-1. OneBeacon wants to determine the reasonableness and necessity of the site investigation ...


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